Baby Bust, Educational Boom and Unemployment in Europe: Economic Factors and Labour Market Institutions

We analyse the effects of demographic changes on relative unemployment rates in European countries. Using a panel of European countries for the 1980-2000 period, disaggregated by cohort, gender and education, we empirically test the economic effects of population age structure changes and the patterns by educational levels. When decomposing the effects we find that while structural shifts in population age structure play an important role, a lot of variation is also attributable to within cohort-education usually neglected in aggregate studies. We find no evidence of generational crowding, as suggested in much of the previous literature, while the effects of demographic shocks are found qualitatively different for young and adult workers.